Demonetisation - Banks park record Rs 1.8L crore with RBI

MUMBAI: With large amounts of cash currently being deposited in bank accounts by customers, the RBI is witnessing a deluge of funds through its reverse repo window as banks are parking their excess liquidity with the central bank. On Tuesday, banks parked a record Rs 1.82 lakh crore with the RBI, data showed. Economists and analysts are expecting this figure to double by Thursday. In comparison, on November 8, the day the government announced its demonetisation decision, banks had parked nearly Rs 14,700 crore with the RBI.

Reverse repo is a banking facility through which banks park their excess funds with the RBI, while in case of fund crunch they borrow from the central bank through the repo facility. In case of reverse repo, the RBI gives banks an equivalent amount of go vernment securities till the funds are parked with the RBI. In case of repo, banks keep G-secs equal to their borrowed funds with the RBI.

On Wednesday, the central bank also conducted a 91 day reverse repo auction and took in Rs 50,000 crore.

This is the first time in the central bank's history that it decided on a reverse repo auction of such a long duration, economists said. The excessive liquidity in the banking system which is leading to record reverse repo amount with RBI, could pose another unique challenge for the central bank, econo mists said. Currently the central bank has G-secs worth about Rs 6.5-7 lakh crore. In case deposits with banks keeps swelling and they come to the central bank to park funds over Rs 6.5 lakh crore, then the RBI may have to issue cash management bill, a rare phenomenon in India's central banking history.